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Know Your Options

Feb 27, 2017 02:24PM ● By Jeffrey Hall

Jeffrey S. Hall, MBA, CPA, Esq.

Giving your house to your children can have tax consequences, but there are ways to accomplish it tax-free. The best method to use depends on your individual circumstances and needs.

Leave the house in your will

The simplest way to give your house to your children is to leave it to them in your will. If the total amount of your estate is under $5.49 million (in 2017), your estate will not pay estate taxes. In addition, when your children inherit the property, it reduces the amount of capital gains taxes they must pay if they sell the property. Capital gains taxes are taxes paid on the difference between the "basis" in property and its selling price. If children inherit property, the property’s tax basis is "stepped up," which means the basis would be the value of the property at the time of death, not the original cost of the property.

Gift the house

When you give anyone other than your spouse property valued at more than $14,000 ($28,000 per couple) in any one year, you must file a gift tax form (IRS form 709).  But you can gift a total of $5.49 million (in 2017) over your lifetime without incurring a gift tax. If your residence is worth less than $5.49 million and you give it to your children, you probably won't have to pay any gift taxes, but you will still have to file a gift tax form. 

Sell the house

You can also sell your house to your children. If you sell the house for less than fair market value, the difference in price between the full market value and the sale price will be considered a gift. As discussed above, you can use the $14,000 annual gift tax exclusion as well as the $5.49 million lifetime gift tax exemption on this gift. The same issues with gifts discussed above will apply to this gift.

Put the house in a trust

Another method of transferring property is to put it into a trust.  If you put it in an irrevocable trust that names your children as beneficiaries, it will no longer be a part of your estate when you die, so your estate will not pay any estate taxes on the transfer. The house will also not be subject to Medicaid estate recovery.

Figuring out the best way to pass property to your children will depend on your individual circumstances. Talk to estate-planning attorney JEFFREY HALL to decide which method will work best for your family. Call now for a free 30-minute consultation at 925-230-9002, or go online to schedule an appointment at


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